Although the 101-page report, published today (October 30), claimed the large majority of BlackRock’s 121 funds delivered value, the giant asset manager pledged to take action on eight of its portfolios.
BlackRock pledged to monitor the performance of its Global Equity, Global Income, Market Advantage, US Dynamic and US Opportunities funds after the performance aspect of the criteria failed to deliver value for consumers.
Both the Global Equity and Global Income funds had delivered a positive return over the three- and five-year periods but had underperformed relative to benchmarks.
BlackRock said the funds were managed with an income focus and quality bias which had led to underperformance in the recent market environment.
It added: “Further performance monitoring will evaluate the funds’ ability to deliver against its broad benchmark while continuing to deliver on its income focus.”
The asset manager also placed the BlackRock Market Advantage Fund on its monitoring radar after it failed to deliver a return of its target of more than 3.5 per cent over Libor.
BlackRock said: “The fund’s performance was challenged by market turbulence during the Covid-19 crisis, negatively impacting long-term performance, which had been strong through to the end of 2019."
The BlackRock US Dynamic fund had also underperformed its benchmark while the US Opportunities fund had returned less than its peers.
Both funds have a value bias, a strategy which has been out of favour for the past decade.
BlackRock said: “We have initiated enhanced performance monitoring, which includes a review of the investment process and the appropriateness of its benchmark.”
Fee cuts
The asset manager also pledged to lower the fees on two of its funds, where it found the charges were “high” compared with its peer group.
BlackRock reviewed the annual fund management costs on its BlackRock Cash fund and said that from November 30, the fund’s expenses would be more in line with its peer group.
Blackrock’s Cash fund currently charges an ongoing fee of 0.32 per cent compared with its peer group’s 0.18 per cent.
Fees were also cut on the BlackRock Balanced Growth Portfolio fund by 10 basis points.
The report shows the fund’s current charge, of 0.96 per cent, was higher than the average 0.79 per cent.
Void of value
BlackRock found that its Emerging Markets Absolute Alpha fund did not deliver value to investors.
It said: “Prior to the value assessment, the fund was flagged for review as part of our ongoing fund governance.
“This review resulted in the decision to close the fund based on several factors, including performance, low investor interest and commercial considerations.
“Investors were informed in June 2020 and the fund was liquidated in August 2020.”
Graham Bamping, chairman of BlackRock Fund Managers, said: “While our results demonstrate that the very large majority of our funds are delivering value, we are not complacent. We continually aim to enhance the value we provide to investors.”
Mandatory assessment
As part of the Financial Conduct Authority’s asset management review, fund houses are now required to carry out an annual assessment of whether the firm provides value for their clients.
The value rules — which have been in effect since the start of 2020 — require asset managers to look at their performance, costs, economies of scale, comparable market rates, services and share classes.
The mandated reports have already triggered Artemis, M&G and Aviva Investors to make changes to their fund ranges and charges.
Similarly to BlackRock, others such as SJP, Vanguard and Hargreaves Lansdown have insisted their funds deliver good value.
What do you think about the issues raised by this story? Email us on fa.letters@ft.com to let us know.
